What is a refund and a credit note entry?

Before starting

Most of the entries you will have to make are simple: expenses, receipts, cash deposits in the bank, transfers between your accounts, etc. In the life of your organization, you will probably have to pay back some people or issue assets. This article explains how to do this.

Credit recording is done under specific conditions: in case of doubt, you can contact an accountant who can help you. 

Definition of refund and credit note

Reimbursement

The refund is made, for example, if your member has paid for a membership or a course, or has purchased tickets for an event or products via your online store, and given a specific reason (e.g., cancellation of the event), he/she asks to be refunded the total or a partial amount of the payment made to your association.

It is the same principle as the credit note, except that you must enter the outgoing payment to your member (refund).

Credit note

The definition of a credit note is simple. It is an operation that aims to correct or cancel an already-issued invoice. 

It is necessary to make a credit note, for example, to correct an invoice to respect the accounting obligations. Indeed, in accounting, it is forbidden to delete or alter documents. In case of an error, it is impossible to modify the first invoice; it must be canceled by a credit note.

Credit can be used in different situations. Example:

• In case of an error on the invoice: if you have made a mistake on an invoice that has already been sent to your customer or member, you must imperatively issue a new one to account for the difference in the amount or with the correct information. For example, if you have invoiced 550 euros for goods instead of 500 euros. The credit note will mention the 50 euros of overpayment.
• In case of a commercial gesture: it can be helpful to give a discount to a customer or a member (to build loyalty or to compensate for an error on your part). However, if you want to give a discount when you have already sent an invoice, you have to issue a credit note to record your discount in the accounts.